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LOOKING AT BRISBANE IN 20/20

Over the last 12-months there has been an increasing number of news articles anticipating Brisbane’s property market ‘turning the corner’ between 2020 – 2022.

It’s exciting to see the latest data supporting the improvement in the market. This post is a quick overview of the trends emerging from the latest data on the Brisbane Property Market.

OVERSUPPLY OR UNDERSUPPLY

The Brisbane market peaked in 2016 when over 7,000 apartments were delivered to the market. However, according to RP Data there has been a dramatic decline in supply since, with the excess stock absorbed into the market:

  • Approximately 2,900 apartments were completed in Brisbane in 2019
    • This is less than half the apartments that were delivered in the 2016 peak
  • In 2019 construction commenced on just 2,100 apartments
    • The lowest recorded number of commencements since 2010
    • When we take into consideration the build cycle is generally circa 18-months, most of these commencements won’t reach completion until 2021 or later
  • Supply will fall sharply again in 2020
    • In order to reach completion in this calendar year, a project must already be under construction
    • In fact, 2020 is on track to record the lowest level of completions since 2013

The sharp decrease in supply is, in turn, expected to rebalance the market and spur the expected recovery for inner-city Brisbane Apartments.

VACANCY RATES

The dramatic fall in apartment completions following the period of oversupply is now leading to the excess stock being absorbed.

A good indicator of demand vs supply is the vacancy rate. A 3% vacancy rate is generally considered a ‘balanced’ market, where there is sufficient residences to meet demand.

Brisbane’s vacancy rate fell to 2.9% in December 2019, indicating the market has effectively balanced its self. If the supply of apartments does not meet demand then the vacancy rate will drop, indicating the market is undersupplied.

ADAPTING MARKET

Owner-occupiers have quickly become a notable segment of the Brisbane Apartment Market.

  • In Quarter 4, 2019 owner-occupiers made up 61% of sales of new apartments, according to research firm Urbis Economics
  • This is a significant increase compared to Q4 2018 where owner-occupiers comprised just 16% of new sales!

Developers are responding to this change, and we are seeing more high-end and boutique residences brought to the market. According to the property advisory firm Charter Keck Cramer:

  • An estimated 41% of projects commenced in 2019 were in projects of 10-50 apartments
  • 49% of projects launched in 2019 contained 101-200 apartments

LOOKING BACK TO LOOK FORWARD

There are several factors that affect demand and supply in the property market. We have covered in the past Brisbane’s extensive infrastructure commitment and also looked at Brisbane adapting and changing to become a global lifestyle city. These articles provide some further context of the factors affecting supply and demand in Brisbane.

In short, there was a ‘perfect storm’ of conditions that caused the slowing of the market in Brisbane since 2016. Subsequently, the market is now showing that it has adjusted to these conditions:

  • High levels of completions in 2016/2017 tipped the market into oversupply, but this stock has largely been absorbed with the pipeline of supply slowing over the coming 12-months
  • We are seeing a change in the type of apartments coming to market, with an increase of boutique projects designed to accommodate the owner-occupier who are an increasing segment purchasing brand new apartments

We have previously covered the Property Cycle and the key indicators that are generally used to understand the property market. You can read more about the Property Cycle here.

Which Property clients have benefited from our in-depth knowledge of the property market for over 20-years. Contact us today to see how we can help you purchase brand-new or off-the-plan properties. Contact us today for more information.

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